The Bank of Japan's latest discount rate cut was seen as a largely cosmetic measure.

Its target for the unsecured overnight call rate has been left unchanged at 0.25 percent.

It is noteworthy, however, that the BOJ has declared that it will introduce a "Lombard-type" lending facility, signaling to the marketplace that it intends to serve as a safety net if anything goes wrong.

The dollar has recouped much of its recent losses, but given the lingering worries about U.S. economic prospects and the volatility of New York stock prices, a steady rise against the yen appears unlikely.

There has been talk that Japanese institutional investors unwound investment portfolios overseas and repatriated part of them to their home markets in recent weeks.

Signs of a steep slowdown in the U.S. economy meanwhile weighed on the dollar's value.

Now that worries about the Japanese economy have largely been factored into the yen's value, the dollar's upside will be capped by speculative sales from time to time.

Emerging as a focal point is a meeting of finance ministers and central bank governors from the Group of Seven nations to take place Saturday in Palermo, Sicily.

The global economic environment has undergone significant change since the September G7 meeting of finance leaders in Prague. The remarks of U.S. Treasury Secretary Paul O'Neill will thus draw much attention.